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Econ 222: Intermediate Macroeconomics Question Paper

Econ 222: Intermediate Macroeconomics

Course:Bachelor Of Science In Economics And Statistics

Institution: Chuka University question papers

Exam Year:2013

CHUKA

UNIVERSITY

UNIVERSITY EXAMINATIONS

ECON 222: INTERMEDIATE MACROECONOMICS

STREAMS: TIME: 2 HOURS

DAY/DATE: THURSDAY 8/8/2013 8.30 AM- 10.30 AM

INSTRUCTIONS:

Answer Question ONE and any other TWO Questions

QUESTION ONE

The goods market and money market of an hypothesis economy is given below.

C = 100+0.42Y
I = 2.500 – 3 r
L_s=20-2r
L_S = 20 – 2 r
Ms = 1.500

(a) Derive the equation for I-S curve [4 Marks]

(b) Derive the equation for L – M curve [4 Marks]

(c) Determine the equilibrium level of income and interest rate. [6 Marks]

(d) If the money supply is increased by 100, what would be the effect on the equilibrium level of income and interest rate? [4 Marks]

(e) Explain the motives for holding money. [6 Marks]

(f) Distinguish between adaptive expectations and rational expectations. [6 Marks]

QUESTION TWO

(a) Explain the factors that determine the level of investment in a country. [4 Marks]

(b) Discus the theories of investment. [8 Marks]

(c) Supposing you are the chief economist of a given economy, what measures would you take to improve the level of investment in that economy? [8 Marks]

QUESTION THREE

(a) Discuss the key stages of macroeconomic development. [14 Marks]

(b) Explain the crowding out effect in an economy. [6 Marks]

QUESTION FOUR

(a) Given the following information.

C=12300 + 0.75Y^d
I=800
G=1000
X=250
M=20+0.25Y
T=150+0.1Y

Required:

(i) Determine equilibrium income. [4 Marks]

(ii) Determine the level of consumption at equilibrium income. [4 Marks]

(iii) Determine the balance of payment [4 Marks]

(iv) Calculate the government expenditure multiplier. [4 Marks]

(v) Calculate the imports multiplier. [4 Marks]

QUESTION FIVE

(a) Explain the factors that lead to:

(i) Shifts in I-S curve [3 Marks]

(ii) Shifts in L-M curve [3 Marks]

(b) Graphically show and explain the derivation of LM and I-S curves. [8 Marks]

(c) Explain the causes for inefficiency of monetary policies and Fiscal policies in solving macroeconomic problems. [6 Marks]

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Econ 222: Intermediate Macroeconomics Question Paper

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